To remain sustainable, reinsurers must engage with super fund trustees and insurers to align with the needs of members and policyholders.
That was the message from a panel of industry leaders speaking at the recent FSC Life Insurance Conference in Sydney.
Mark Stewart, Managing Director of RGA Australia and New Zealand framed the conversation by saying that, in a mature market of slowing growth, increased regulatory scrutiny and media criticism, reinsurers need to be strategic: “This is a really important time for the industry to have a long-term mindset, because there’s a lot of short-term pressures around at the moment. We need to leave this industry in a better state than how we found it and, I think, that starts with how we look at ourselves.”
Reflecting on how his organisation undertook such self-reflection, Munich Re CEO Andrew Linfoot, explained: “About two years ago we really examined what our purpose was as a reinsurer and decided that it was very much about providing sustainable protection to policyholders. Some people said, ‘But we don’t talk to policyholders – our client is the insurer,’ and that’s true. But ultimately, we exist because we’re able to provide protection for Australian customers and their families.”
Linfoot said that this clarity of purpose then informed all key business decisions thereafter: “In the product space, we took the decision that everything we do must be sustainable. So that informed our product design and how we try to influence partners to move towards, or move away from, certain things. Because I think without having a product that a customer can understand, and that they can afford now and in the future, how can we expect to have a viable business or a viable industry?”
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Collaboration will benefit consumers
To better understand the needs of customers, reinsurers need to collaborate with the wider industry, according to Stewart. “Historically this is not something reinsurers were used to, but going forward the onus is on reinsurers is to be proactive and visible. Some vulnerability comes with that, but we’re already seeing the emergence of this model and it’s actually very productive and positive.
“By getting the insurer, the trustee and the reinsurer together around the table, you can start having really open discussions around what the philosophy is for the insurer and how that ties in to what the trustee is trying to achieve for their members. Once you start getting those insights, the reinsurer can start saying, ‘Well, actually, I can see what I might be able to do to optimise that for you’.”
SCOR Global Life Australia CEO, Dion Russell, pointed to data and innovation as ways that reinsurers can collaborate with other industry participants to deliver better products and outcomes for customers: “Reinsurers can offer global insights and offer ideas of what has worked in other markets [such as] consumer preferences and behaviours.”
By way of example, Russell explained that this could help create more holistic plans for health management: “We need to share insights from our data and analytics to make underwriting more inclusive and provide it to more people. Then we can provide insurance to more consumers at an earlier stage, to help people to return to good health. For example, at an earlier point after cancer to assist with cancer recovery.”
Linfoot agreed, adding that Munich Re had invested heavily in innovation in recent years: “There's a lot of different tools, different business models, different service propositions that Munich Re is standing behind and launching. All of these have the goal of improving the quality of the service that ultimately gets delivered to the customer, whether that's something at our back end, or our partner's back end, or even a tool for the customers at the front end to use.”
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Achieving future growth
The panel also discussed the prospects of future growth for the industry. Russell emphasised that growth should not be pursued for its own sake but because there are areas of underlying need where people are currently under-insured. He also pointed to two potential levers that reinsurers might pull to achieve growth: efficiency and innovation.
“Efficiency is key,” he said. “We need to take cost out of the system. We need to be more efficient in the way that we distribute product, in the way that we manage product, and in the way that we deliver services. Where reinsurers can help is in areas like robotics, technology, and process efficiency.”
As for innovation, Russell emphasised that innovation in reinsurance is not going to involve brand new products that the market has never seen before. Instead, he said, “it’s going to be small changes that make a difference to the customer journey; to the ability of people to buy the product, hold the product and like the product.”